PETALING JAYA: Small and medium-sized enterprises (SMEs) in Malaysia continue to struggle with environ-mental, social and governance (ESG) adoption due to financial constraints, limited expertise and regulatory complexities.
ESG Malaysia president Steven Lee said the organisation is stepping up efforts to bridge this gap by providing SMEs with the necessary tools, training and resources to integrate sustainability into their business models
“A key initiative is the development of an affordable online ESG reporting platform in partnership with the government. This platform will also simplify ESG tracking and reporting, making it easier for SMEs to comply with sustainability requirements.
“It reduces costs, time and effort while ensuring accuracy and completeness for verification and assurance. The platform evaluates and rates ESG submissions, providing businesses with a performance score that enhances their reputation and competitiveness in global markets,” he told SunBiz.
Beyond digital solutions, he noted that the organisation is also offering structured training on sustainability materiality reporting, carbon accounting, ESG risk management and impact assessments, adding that the sessions will help SMEs to bridge knowledge gaps and stay aligned with evolving sustainability standards.
He highlighted that lack of expertise remains a major roadblock for SMEs, preventing them from fully understanding and implementing ESG strategies.
“To address this, ESG Malaysia is fostering a strong network of sustainability professionals who can guide businesses in adopting responsible practices.
“By equipping SMEs with ESG knowledge, we are ensuring they can navigate new regulations, access sustainable financing and meet investor expectations,” Lee said.
He remarked that ESG adoption is becoming increasingly important as financial institutions and international investors prioritise sustainability compliance, businesses that fail to align with ESG principles risk losing funding opportunities and market access, particularly as global supply chains demand higher transparency and ethical sourcing.
Despite Malaysia’s progress in sustainable finance, he said smaller businesses still face hurdles in securing ESG-linked financing.
“Many struggle to meet eligibility criteria for green loans, sustainability-linked bonds and responsible investment funds. SMEs often view ESG as an additional financial burden rather than a long-term investment.
“High costs associated with ESG assessments, carbon emissions tracking and supply chain audits deter many from pursuing sustainability initiatives.
“Without financial support and capacity-building programmes, SMEs will find it difficult to transition towards ESG compliance,” Lee said, adding that greater incentives from policymakers are needed to encourage wider adoption.
Furthermore, he remarked that Malaysia has been proactive in introducing sustainability regulations, like the National ESG Strategic Plan (NESP) and the National Sustainability Reporting Framework (NSRF), but many SMEs remain unfamiliar with these frameworks or lack the expertise to implement them effectively.
In response, he said that ESG Malaysia is advocating for clearer regulatory guidelines and structured roadmaps to help SMEs gradually integrate ESG principles into their operations.
“Market-based incentives could also accelerate adoption, such as rewarding businesses with strong ESG performance through preferential treatment in government procurement contracts and export support,” he added.
He noted that public-private partnerships have the potential to drive ESG innovation, with collaboration between the government, businesses that embed sustainability into their operations will gain a competitive edge.
“SMEs are the backbone of the nation’s economy and ensuring they are ESG-ready is crucial for the country’s long-term sustainability goals,” Lee said.
